Ardian Averrhoa Nature Based Solutions Fund

Direct: By financing projects that undertake afforestation, reforestation and revegetation (“ARR”) of tropical forests, wetlands and mangroves. These areas will subsequently become land sinks, removing carbon from the air. The fund actively aims to enhance both vegetal and animal biodiversity within its projects by preserving ecosystems and restoring natural habitats for native species. Through direct job creation in operating and managing forests and wetlands, as well as carbon revenue sharing with local communities.

Global (~33% Africa, ~33% APAC, ~33% Latin America).

As significant natural land sinks, the restoration of tropical forests are cited as being a high priority climate solution given their significant sequestration potential. Using global commitments of forest restoration of 161-230 million ha of degraded land (as tracked by Project Drawdown), 54-85 Gt CO2e could be sequestered by 2050, making tropical forest restoration the 3rd most significant climate solution globally.

Global (~33% Africa, ~33% APAC, ~33% LatAm).

Jobs created will include low-skilled, manual planting and tree nursery activities as well as higher skilled forest management activities such as fire protection, pest control and disease prevention. Employees are primarily low-income and from local communities surrounding projects.

Global (~33% Africa, ~33% APAC, ~33% Latin America).

This transaction directly contributes to the key SDG15 targets of i) restoring of at least 30% of degraded terrestrial, inland waters, and coastal and marine ecosystem by 2030 and ii) halting the loss of biodiversity and reducing degradation of natural habitats.

Ardian have indicated that they expect the fund to remove 150 MtCO2e over 40 years with 97 MtCO2e across 10 proposed projects and 283,000 ha in the non-OECD advanced pipeline. This amount would be significant, equating to 600,000 tCO2e removed per USDm invested. Based on the non-OECD indicative pipeline, the fund will create 2280 direct jobs. This number is likely to evolve as the pipeline is finalised. Carbon revenue sharing differs by project ranges from 0-20%. Ecosystems expected to be restored under the project pipeline include tropical and temperate forests, wetlands, mangroves and peatlands. Assuming planted forests and mangroves remain well managed, we expect the biodiversity benefit to be long-lasting.

Sequestration impacts are expected to have a minimum duration of 40 years given the carbon credit lifespan. We expect job creation to be primarily within rural low-income households. Jobs are primarily seasonal planting roles with roughly 30% converted into full-time permanent monitoring roles. Revenue sharing is expected to last the full length of each project’s life (usually ~40 years).

We are confident that DFI capital would be necessary to reach the fund’s target size. Given the significant need for capital for ARR at the market level, we will have strong financial additionality. DFI involvement is driving up E&S standards in line with IFC performance standards, particularly on resettlement (which is shaping the pipeline).

Unexpected Impact Risk

Risk that local populations do not benefit or are negatively impacted e.g. through resettlement of local populations, or unequitable benefit sharing. This risk is partially mitigated through the strengthening of Ardian's ESMS and increasing its E&S capacity, as agreed under the ESAP. We have gained comfort around Ardian's approach to equitable benefit sharing through a site visit and examining its policies. Despite these mitigants the residual impact risk remains high, given the nature of ARR projects, and will require close and active monitoring.

Execution Risk

The fund will be undertaking large-scale greenfield projects with impact outcomes fully tied to effective delivery. Inadequate management of forests and mangroves planted could lead to subsequent deforestation and a loss of the carbon removal impact. These risks are partially mitigated by partnering with experienced, credible project developers.

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